Pages

Friday, April 19, 2013

The Zone Improvement Plan (ZIP) Code: 50th Anniversary

The ZIP code turns 50 this year, and the U.S. Postal Service Office of Inspector General has published a research paper (RARC-WP-13-006) to tell "The Untold Story of the ZIP Code."

Back in 1943, the postal service divided up large cities using two-digit
"zone numbers," which were mainly used by large mailers. In 1944,
Philadelphia Postal Inspector Robert Moon suggested dividing the country
into three-digit zones. Combining the three-digit national zones and
the two-digit local zones led, after a lag of about 20 years, to the
introduction of five-digit zip codes in 1963. (The U.S. was not the first country to use postal codes; for example, West Germany had done so previously.) Half of Americans were
using zip codes by 1966, and 83% were using them by 1969. The zip code
expanded to nine digits in 1983 and now is up to 11 digits--with the
last two digits providing the order in which carriers deliver
letters--but households only need to use the five-digit code.

The ZIP code greatly helped the automation and efficiency of mail delivery: before the code, a typical piece of mail needed to sorted and handled by 8-10 pairs of hands. But in addition, the ZIP code is an open source product for organizing data by geography. The report notes:

"The ZIP Code was established as an open use product publicly accessible
from the outset. In fact, the Postal Service only filed a trademark for
the “ZIP Code” name in 1973 The openness of the ZIP Code as a platform
for economic activity is part of the reason for its immense success far
beyond its initial conception. Unlike most commodities, the ZIP Code is
not rivalrous; use by one party does not exclude its use by any other.
The Post Office took no steps to make the ZIP Code exclusive but rather
provided it as a public good for use by any party, free of charge. ... "

"Other organizations and businesses soon realized the ZIP Code
possessed an elegant simplicity for efficiently organizing data by
geography. The U.S. Census Bureau, for example, uses the ZIP Code to
organize its statistics. Other industries, like real estate and target
marketing companies, redefined the way they do business by basing their
informational structure on the ZIP Code. The ZIP Code is solicited or
used in a variety of transactions, such as buying gas with a credit card
at an automated pump. Today, a ZIP Code and physical mailing address
are widely recognized attributes of an individual’s identity."

The study estimates an economic value on the ZIP code of about $10 billion per year. The summary chart looks like this:

How might the ZIP code be extended in the future? The report offers two main suggestions. One is that ZIP codes could be linked with geocodes. "Geocoding is the process of associating precise geographic latitude and longitude coordinates with physical addresses, including street addresses and ZIP Code boundaries." This is already done in the UK. Adding geocodes would help the Post Office to plan faster and more efficient delivery patterns--and would also help private sector firms that do lots of shipping and deliveries. In addition, detailed geocoding of zip codes could include local features of terrain, or be used to track weather or disease. The other main change would be to link ZIP codes with demographic data. The report envisions that people could opt into a system where they provide data to the post office, which would allow better targeting of advertising. But in addition, one suspects that if geocodes and demographic information were linked with ZIP codes, clever innovators would find ways to use that data in ways that are beyond our current imagination.

Finally, the report suggests in comments here and there that the development of ZIP codes might also assist economic development around the world. The report notes: "Current
estimates show as many as 4 billion people worldwide are
unaddressed and approximately sixty Universal Postal Union countries
have no postal code system. ... There is strong evidence that
implementing addressing systems in impoverished neighborhoods can
actually increase the overall quality of life by allowing basic
infrastructure, such as electricity, water, communication, and
government services to be delivered to the area. This was seen in the
slums of Calcutta, for example, where spray-painting unique addressing
numbers on houses yielded significant positive effects on overall
quality of life in the city’s neighborhoods. This effort has allowed the
local government to organize the delivery of water and electrical
utilities to the slums and residents now have the legal identities
required to apply for bank accounts and jobs."

Mr. Zip, who was introduced as a symbol of the postal service at the same time as the ZIP code, has also turned 50.